There are many payment systems available. For example, U.S. Pat. No. 5,920,847 (Visa) describes a bill payment system wherein participating consumers pay bills to participating billers through a payment network operating according to preset rules. Many use various forms of payment message. It is also known to provide systems where there are secret passwords or the like used to authenticate the payments and in particular, the payment of transactions in electronic commerce, such as, for example, described in PCT Patent Specification No. WO 98/14921 (Certco LLC). Other systems have been directed towards providing a method of making small payments, referred to as micropayments, for trading on the internet. A typical example of such a patent specification is WO 99166436 (Protx Limited).
There are many methods of trading over the Internet and the present invention is not directed to such methods, whether they be quotations systems, brokering systems, methods of filling and replenishing shopping baskets, and so on.
Presently, there are numerous systems for trading on the Internet. The most common form of settling a payment between a customer and a merchant is with the customer using a credit card. The customer gives the merchant the customer's credit card details in order to effect a transaction. Essentially, before a merchant can get paid, the merchant has to check that the credit card is valid and that further, the person using the credit card is the authorised person. Generally, this is carried out by the merchant authorising the transactions with some clearing or authorising agency. The merchant, if the merchant is to be paid must validate the identity of the card holder before concluding the transactions, otherwise, the merchant may be liable for any fraud that may be committed. Merchants cannot carry out authentication of every transaction and therefore suitable checking does not occur in practice. Many transactions are only validated in batch by a clearing or acquirer bank later than the trade was carried out or alternatively, merchants accept the validity or at least assume the validity of a credit card number proffered when the value of the trade is below some predetermined amount. These systems leave the merchant wide open to fraud and to abuse by those wishing to carry out a trade with the merchant using a stolen credit card number. It is important to appreciate that it is only the number that needs to be stolen. This, therefore, leads directly to the problem for the consumer in that, if the consumer releases his or her credit card number, they have no control subsequently on a third party illegally using that credit card number in Internet trading.
Due to the explosion of Internet trade recently, fraudulent use of credit cards has become a problem. Because the Internet shields the identity of the person using the credit card, all that is required is that a fraudster acquires the details of a valid credit card. These details can then be used, as suggested above, to purchase goods and services below a specific monetary value without detection. Several security systems have been developed to combat this problem, including complex encryption methods, certification systems and third party verification systems. None of these systems can prevent all types of fraud and most only act as a confidence builder for the customer. Currently, because of inefficiencies with regard to time delay and because of the cost and effort in effecting authorisation and authentication, the majority of systems are implemented such that transactions below a certain value bypass most of the security systems. A problem associated with complex security systems used to prevent fraud is that they add to the cost of and delay the completion of each transaction. They require the card holder to supply to the merchant personal details of the customer that restrict the ease of use of these security systems. It is off-putting and time consuming for the customer to enter all these details. Another problem for the customer is that the security systems introduce a delay for the customer which can be quite annoying and infuriating for the customer trying to effect a trade on the Internet. This tends to discourage people carrying out transactions on the Internet.
Another problem associated with effecting transactions on the Internet is the fact that any transaction conducted over the Internet costs some amount of money for the credit card company, the cost being a transaction cost rather than a percentage of the value of the transaction. This means that there is a break even point for the credit card company below which the transaction does not make a contribution. This makes credit card payments on the Internet unsuitable for a large number of small value transactions. Another problem associated with effecting transactions on the Internet is the high incidence of disputed payments. Again, these are a source of considerable cost to the financial institution. These may result from fraud, error or even forgetfulness.
One of the effects of the amount of card not present fraud is that consumers are more and more reluctant to disclose their credit card number during this type of trading. There have been too many instances where third parties, not necessarily the merchant, have perpetrated such crimes. In some cases there have been fraudulent merchants who have used a consumer's credit card number to subsequently deliver additional goods to the credit card user, which additional goods the credit card user often has extreme difficulty in returning or refusing to pay for. This type of fraud where the merchant supplies additional goods or services to the consumer because the merchant has got the consumer's credit card number, is on the increase. A further problem is that, for example, some employee of a merchant or some other third party may obtain details of a customer's credit card number and even more importantly, may obtain details that are required to authenticate the credit card such as, for example, the consumer's age, address and other personal information that is required by many an acquiring bank before they will clear a credit card transaction over a certain amount. Thus, the consumer, in addition to not wishing to disclose his or her credit card number, is now extremely reluctant to disclose those personal details which would allow the consumer to be more closely identified and even more so, to have their credit card number more easily authenticated.
In some ways, these problems are exacerbated, as mentioned above, in relation to small amounts of money. People wish to use the Internet to trade but they wish to do it simply and efficiently. If you have to carry out the same transaction procedures and the same authentication to have a payment for a minor sum of money cleared, as you do for a major amount, then using this form of credit card payment over the Internet becomes virtually unworkable. It is too cumbersome for the consumer and too expensive for the merchant and financial institutions.
A further problem for the consumer which is not necessarily directly related to fraud, although obviously partially concerned therewith, as explained above, is the question of anonymity. The consumer, for many reasons, may not wish to give his or her name and, even more importantly, address to a merchant. There can be many reasons for this such as, for example, the consumer may not wish other people to know that they have purchased from that particular site or the consumer may not wish to be subsequently bombarded with what is effectively junk mail from that particular merchant. Thus, there are many reasons other than the simple security one whereby the consumer wishes to retain anonymity.
In summary, therefore, the financial institutions want to, as far as possible, have a system that will allow the consumer purchase over the Internet which will be efficient, relatively inexpensive and, as important, profitable for the financial institution. The financial institution does not want to be clearing relative small sums of money for transactions on a regular basis, nor indeed does it want to be accounting individually to a merchant for these small sums of money as the total cost of handling the transactions becomes inordinate. For the merchant, they want to be able to be paid efficiently and effectively. The merchant wants to avoid cumbersome systems that may or may not protect him from fraud. They want to be able to supply the goods and/or services to the customer with the minimal amount of checking and at the same time, with security that they will subsequently be paid.
Finally, the consumer requires anonymity in many instances and further, requires that an efficient and fraud free method of accounting for such transactions be available. Lastly, the customer wants an accounting system which is accurate and transparent.